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How successful can “ Make in India ” Drive be?

, May 4, 2015, 11 Comments

make in india-marketexpress-in“I tell the world, Come, ‘Make in India’, sell anywhere but manufacture here”, these roaring words of PM Modi became the heart of the nation-wide drive called “Make in India”.

After coming to power, PM Modi unveiled his ambitious campaign “Make in India” to attract foreign capital and convert India into a global manufacturing hub. We all have heard or read about this initiative in various public forums, but what exactly do we comprehend by this strategy.

“Make in India” is an initiative of the Government of India to encourage companies to manufacture their products within the boundaries of the country. Launched on 25th September 2014 by Prime Minister Narendra Modi, this campaign is a global phenomenon to strengthen the macroeconomic fundamentals of the economy. The basic idea underlies in the fact that job creation requires moving from services-driven growth model to labor-intensive manufacturing-driven growth. For this, we need to reach out to global investors asking them to manufacture goods in India, while emphasizing on skill enhancement to create zero-defect products with zero (negative) effect on environment.

The Make in India program includes new initiatives designed to help investment, foster innovation, protect intellectual property, and build best-in class manufacturing infrastructure. This campaign focuses on 25 sectors of the economy encompassing automobiles, chemicals, IT, pharmaceuticals, defence manufacturing, construction, electronics, oil and gas, leather, food processing, media and entertainment, mining, ports, railways, renewable, roads and highways, textiles, tourism, and wellness.

To finish this goal, a lot of issues need to be addressed which have posed problems for the business community and hurting investor sentiment.

The first step in this direction would be to cut the number of regulatory approvals required by the industrial houses. A series of measures have been undertaken on this front with emphasis on simplification and rationalization of the existing rules and introduction of information technology to make governance more efficient and effective.

Apart from easing of regulations, the growth in manufacturing sector is guided by proper infrastructure in place. India’s manufacturing infrastructure is poised for phenomenal growth with impetus on developing smart cities and industrial corridors. A new ‘National Industrial Corridor Development Authority’ is being created to coordinate, integrate and watch the development of all industrial corridors. Work on 5 smart cities is in progress as a part of the Delhi-Mumbai Industrial Corridor (DMIC): Dholera, Shendra-Bidkin, Greater Noida, Ujjain and Gurgaon.

There are plans to link the north-eastern part of India with other Industrial Corridors in cooperation with the government of Japan. Approval has been accorded to 21 Industrial projects under Modified Industrial Infrastructure Up-gradation Scheme with an emphasis on use of recycled water and central affluent treatment plants. Various other infrastructural developments are also in the pipeline which can help bolster manufacturing growth.

The success of “Make in India” campaign also depends on relaxing foreign investment caps in various sectors. The government has raised FDI cap in defence sector from 26% to 49% and 100% FDI under automatic route has been allowed in specified rail infrastructure.These steps will help in bringing down the military imports of India. The easing of norms for FDI in construction sector is also underway which can give a boost to ‘affordable housing’.

In the recent past, Modi’s visit to major economies like United States, Japan, France, Germany and Canada, and promotion of his ‘Make in India’ campaign to encourage investment from world’s major economies has boosted investor sentiment. The charismatic personality of Modi and the easing of regulatory approvals have resulted in signing of some high profile investment deals.

In France, Modi managed to break the impasse when he signed a government-to-government deal with France for the supply of 36 Rafale jet fighters in “fly-away” condition as quickly as possible. Though this goes against his “Make in India” campaign, the support received from Airbus to manufacture in India more than compensated for the deal. Airbus group is likely to increase its sourcing of aerospace parts from Indian companies to $2 billion in the next five years. India and France also inked deals for improving the financial viability of the Jaitapur nuclear plant project by reducing cost through employment and training of local people.

Though no formal pacts were signed between the two governments in Germany, there were announcements of strengthened cooperation in sectors like energy, skill development, science and technology. Modi also inaugurated the Hannover Messe, considered one of world’s largest congregations of industry gurus, where India was a partner country. Hannover Messe saw Indian public sector units, including HMT Ltd and BHEL, sign key pacts with companies from Germany, Switzerland, Bulgaria and Russia for scaling up Indian manufacturing in high-tech areas.

With Canada, the visit resulted in several new bilateral agreements and commercial deals worth over $1.6 billion in a broad range of areas, including energy, railway transportation, education and skills development, space cooperation, and child health. Modi secured a landmark nuclear energy deal, which will supply India with 3.2 million kilograms of uranium over a five-year period.

An assessment of the measures and initiatives taken by the government shows that a lot has been done and a lot is still left to be done to make this campaign a huge success. Reforms such as loosening labor laws and easing of regulatory requirements have not been forthcoming. The deadlock over land acquisition bill and implementation of GST acts as a major obstacle to this initiative. The blame-game between political parties only adds to the woes of the policymakers. Apart from the domestic factors, the success of this campaign also depends on external factors like demand from major economies, investor sentiment, political conditions prevailing in the country etc.

To sum up, it’s too early to evaluate the impact of this initiative, but considering the vast potential that the Indian economy possesses in terms of resources, this campaign has to be spearheaded by the government. This can be achieved by resolving key policy issues and providing an environment that is conducive for investment growth in the country.

  • Palash Holkar

    very informative article

  • SakshiB

    Palash Holkar thanks

  • SakshiB

    Palash Holkar thanks

  • vaniagg005

    Good analysis!

  • Saurabh Aggarwal

    Nyc concept.. agree with the author great work done by her…!!

  • unme1012

    A good article, however easing if regulations should be taken more seriously, as in smoothing out the process shouldnt b confused with no regulatory authority! I hope Govt. will take care of that..

  • SakshiB

    Saurabh Aggarwal thanks!

  • SakshiB

    vaniagg005 thanks!

  • SakshiB

    unme1012 thanks for your feedback.
    Indian government is trying to ease the regulations not by removal/closure of any regulatory authority but by making the process more simple. To name a few initiatives taken in this direction, environmental clearances can be obtained online, e-filing of returns through a unified form, checklist of required compliances to be placed on Ministry’s/ Department’s web portal

  • jeyenthi_raman

    Very good and informative article.. The way analysis has been done is briiliant in the sense that the language used is very simple yet explaning the point .. Good Read!!!

  • SakshiB

    jeyenthi_raman thanks!